Weemba

One by one, three banks put the kibosh on Michael Kelner’s plans to expand Hardcoat Inc., a decades-old St. Louis Park company that puts protective finishes on aluminum. One of them had him see two loan officers, he said, before packing him off to Chicago to see a third.

“We wasted literally months putting together pro formas, spreadsheets,” Kelner recalls. “They made us jump through hoop after hoop after hoop and in the end said, ‘This doesn’t really fit our model.’”

Kelner finally got his loan from a fourth bank, but his frustration speaks to the ongoing squeeze on small business lending. More than two years after the official end of the Great Recession, lending to Main Street businesses in Minnesota is still down.

Outstanding small-business loans at the nearly 400 banks chartered in Minnesota fell 4 percent in the first three quarters of last year and were down 13 percent from mid-2008, according to a review the research firm Trepp LLC did for the Star Tribune. Bigger banks that make a lot of small-business loans in Minnesota but are chartered elsewhere — including Wells Fargo and BMO Harris Bank — collectively have shrunk their level of small-business loans across the country.

Whether this is about tight-fisted bankers or weak demand — or some of both, as bankers and borrowers stare each other down — is a matter of debate. Either way, the decline in money flowing to small businesses matters because they play a crucial economic role as both employers and customers of other firms.

Read more of this story at the Minneapolis Star-Tribune.